Construction of multidimensional poverty index of Kenya using the Alkire-Foster method

Abstract

In this paper, we use one specification of the Alkire-Foster approach, which is referred to as the Multidimensional Poverty Index (MPI), to calculate the poverty index of Kenya. This index was computed for 104 countries in Alkire and Santos (2010) and launched as a prominent feature of the annual United Nations Development Program (UNDP). Human Development Report, replacing the previous Human Poverty Index of the United Nations Development Program. The novelty of this paper is that it seeks to reconstruct the poverty index which is used in Kenya’s Revenue Allocation formula. Currently, the country is using a modification of Human Development Index as used by UNDP which gives weights to different aspects of deprivation, a method that has been dubbed as ‘Lucy’s model’, named after the person who developed it in December 2015, and was approved for use by the Commission for Revenue Allocation to distribute funds from the National government to county governments, by the National Assembly of Kenya on 10th March 2016. The paper compares the allocations arrived at by both Lucy’s Model and Alkire-Foster method in terms of equality of means, variances, correlations and other statistical tests of significance in differences between two or more data sets.